Beef prices at an all time high; Big Impact on Consumers

Beef has never been more expensive, and rarely more controversial. From top-end T-bone to Big Mac, the future of the beef industry is at stake, according toCNBC.

The most obvious expression of this is its price. Cattle futures in the U.S. scaled all-time highs in 2013, and are predicted to peak at a record $1.405 in early 2014. This is already having an impact on consumers, even though there is usually a delay between prices of cattle rising and retail prices increasing.

“People are switching from steak to burgers,” Derrell Peel, agricultural economist based at Oklahoma State University, said.

“Demand for meat and meat product is changing, for economic and health-related reasons,” David Simon, author of Meatonomics, said.

However, the appetite for beef is multiplying rapidly in markets like China – and the competition to secure these markets is increasing.

Where’s the beef?

Cattle supply is at an all-time low in the U.S. after nearly three years of drought, which led to more farmers killing off their herds earlier than planned. U.S. beef output will hit a 20-year low of 24.205 billion pounds this year, according to Department of Agriculture forecasts. It will be 2017 before production is restored, Peel predicts.

High prices are causing concerns in the industry that demand will be affected – and that lower consumption will mean farmers switch to other products.

“The main challenge for the industry is: Where does the beef come from?” Albert Vernooij, a meat industry analyst, told CNBC.

“The challenge is always that the food service chains want to offer burgers at the same price,” Vernooij said. Chains like McDonald’s and Burger King want to keep their flagship burgers at a similar price – but beef is one of their biggest commodity costs.

Beef has a much longer life cycle than other meats like poultry or pork. Heifers typically produce their first calf at around 9 months, and have another one or two before being slaughtered for their meat at between 2.5-3 years old – although that has come down to around 2.3 years in 2013 as producers tried to compensate for the effects of drought, according to Rabobank.